PREDICTIVE PERFORMANCES OF EXPORT BUSINESS INDEX IN PREDICTING THAI EXPORT At Thammasat University...

PREDICTIVE PERFORMANCES OF EXPORT BUSINESS INDEX IN PREDICTING THAI EXPORT

At Thammasat University

PRESENTED BY

PAWIN SIRIPRAPANUKULNICHCHAPAT KANJANAUDOMKAN

WORAPAK THITADILOK

Introduction

Goal: To measure predictive performance of Export Business Indices in comparison with other popular macroeconomic indicators

Predictive performance in predicting: Thai-export contraction phrases Thai-export value

Out-of-sample evaluation

Research Methodology

Part 1: Predicting Thai-Export Contraction Phrase

1a) Identifying contraction phrases of Thai Export1b) The Probit Model – to identify variables

that can best predict such phrases

Part 2: Predicting Thai-Export ValueA dynamic model – to identify variables that can best predict the value of Thai Export

1a) Identifying contraction phrases of Thai Export

Let be binary contraction indicator

Peaks & Troughs : NBER Method or Bry-Boschan algorithm

-- Estrella and Mishkin (1998), Diebold and Rudebusch (1991), Karunaratne (2002), Birchenhall, Osborn and Sensier (2001)

-- X-12 program to remove seasonal components

-- Harding and Pagan (1999) and Harding and Pagan (2002) : the trend component plays an important part in generating cyclical movement

-- Apply Bry-Boschan algorithm to the Export Level

1 if Thai export is in a contraction phase

0 otherwisetR

tR

Research MethodologyPart 1: Predicting Thai-Export Contraction Phrase


1b) The Probit Model – to identify variables that can best predict Thai-Export contraction phrase

Estrella and Mishkin (1998)

Probit model with an independent variable xt

forecast horizon h = 1, 3, 6, 9 and 12 months

Log likelihood value Lm

Out-of-sample test

0 1( 1) ( )t h tP R F x

1

0

ˆ ˆ(1 ) ln(1 ) ln( )t

m t h t h t h t ht t h

L R P R P

Benchmark: Probit model with only constant

Log likelihood value Lc

Measure of accuracy

0( 1) ( )t hP R F

1

0

ˆ ˆ(1 ) ln(1 ) ln( )t

c cc t h t h t h t h

t t h

L R P R P

(2

2

/ )

1c

m

c

n LL

pseudo RL


Research MethodologyPart 2: Predicting Thai-Export Value

A Dynamic Model – to identify variables that can best predict the value of Thai Export

Stock and Watson (2003) -- seek the incremental predictive performance from the basic autoregressive model that each indicator contributes

Diebold (1998) -- AR model frequently outperforms Keynesian-based structural model in Out-of-Sample predictions

AR model with an independent variable xt


Out-of-sample test

0 1 0 1 1 12 12... h

t h t t t t ty x y y y

Research MethodologyPart 2: Predicting Thai-Export Value

Benchmark : AR model without an independent variable


Measure of accuracy

( ) ( ) ( ) ( ) ( )0 1 1 12 12...AR AR AR AR h AR

t h t t t ty y y y

1

0

1

0

2

( ) 2

ˆ( )Relative MSFE

ˆ( )

t

t h t ht t h

t ARt h t ht t h

y y

y y

Data

Monthly Data : 2001:m12 - 2011:m5 Dependent variable :

The probability of Thai Export falling into a contraction phase

The value of Thai export

DataIndependent Variables :

Group 1

SymbolIndicator

Name Source

CSE1 Export Value Index

Bureau of Trade and Economic

Indices

CSE2 New Orders Index


Indices

CSE3 Inventory Index


Indices

CSE4Employment

Index


Indices

Data Independent Variables : Group 2

Symbol Indicator Name Source

THLLD

Medium-term Leading Economic Index

Bureau of Trade and Economic Indices

THLD Short-term Leading Economic Index

Bureau of Trade and Economic Indices

CO Coincident Economic Index Bureau of Trade and Economic Indices

CAPB Construction Areas Permitted in Bangkok Metropolis

Bank of Thailand

VACN Value of authorized capital of newly registered businesses

Department of Business

Development, MOC

SETI Stock exchange of Thailand index Bank of Thailand

NFTO Number of foreign tourists Bank of ThailandVMNM Narrow money Bank of Thailand

VMBM Broad money Bank of Thailand



MPIManufacturing Production Index Bank of Thailand

AILRAverage Interbank Overnight Lending Rate Bank of Thailand

CO06Business Tax, VAT, and Specific Business Tax

Revenue Department, MOF

CO07 Import DutiesCustoms

Department, MOF

DSMVQuantity of Automobile Sales Bank of Thailand

IPRIGrowth of Import Price Index Bank of Thailand

PCEM Production of Cement Bank of Thailand

PETIGrowth of World Oil Price Index FIBER

VDCL Growth of Domestic Loans Bank of Thailand



VIMPReal Import Value (In Baht) Bank of Thailand

CUTRGrowth of Capacity Utilization Bank of Thailand

IMPIGrowth of Industrial Material Price Index FIBER

JALDJapan Leading Economic Index FIBER

PBEE Production of Beer Bank of Thailand

PCVEProduction of Commercial Vehicles Bank of Thailand

PMCYProduction of Motorcycles Bank of Thailand

TOTI Terms of Trade Index Bank of Thailand

Results

-30

-20

-10

0

10

20

30

40

50

60

1996 9

1998 2

1999 1

2000 12

2002 2

2005 8

2007 1

2008 7

The Results of Identifying Thai-Export Contraction Phases

Results1-m 3-m 6-m 9-m 12-m

CSE1 0.021 0.051 0.091 0.136 0.132

CSE2 0.031 0.079 0.145 0.213 0.194

CSE3 0.091 0.294 0.373

CSE4 0.052 0.151 0.185 0.198 0.285

THLLD 0.106 0.244 0.179

THLD 0.227 0.031

CO 0.083

NFTO 0.143 0.081 0.151 0.095

VMNM 0.512

VMBM 0.512

MPI_SA 0.290

CO06 0.292

CO07 0.293 0.356 0.190 0.093

DSMV 0.016

IPRI 0.706 0.853 0.755 0.176

PETI 0.082

VDCL 0.536 0.615 0.532 0.410 0.243

VIMP 0.303

CUTR 0.101

IMPI 0.049

PBEE 0.082 0.090 0.039

PCVE 0.045

PMCY 0.008

TOTI 0.142 0.123

VEXP 0.298

Predicting Thai-Export Contraction Phases

: Predictive Performances(Pseudo R2)

Results

The List of Best Predictors of Thai-Export Contraction Phrases for Each Forecast Horizon

Forecast Horizon

1-month 3-month 6-month 9-month 12-month

Best Performing Indicator

IPRI VDCL IPRI IPRI CSE3

Results

Predicting Thai-Export Value

: Predictive Performances(Relative

MSFE)

1-m 3-m 6-m 9-m 12-mCSE1 0.913CSE2 0.899CSE3 0.999 0.981 0.804 0.483CSE4 0.900 0.634THLLD 0.920 0.821THLD 0.928 0.833 0.933 0.990 CO 0.961 0.948 CAPB 0.954 0.951SETI 0.986 0.973 NFTO 0.952 0.841 0.705 0.767 0.714VMNM 0.908 0.782 0.889 0.983 VMBM 0.969 0.874 0.986 MPI_SA 0.963 0.925 CO06 0.953 0.886 CO07 0.957 0.727 0.684DSMV 0.957 IPRI 0.851 0.560 0.517 0.608 0.716PETI 0.951 0.818 VDCL 0.939 0.859 VIMP 0.884 0.876 IMPI 0.966 0.864 0.987 PBEE 0.984 0.976 0.998 0.819PCVE 0.976 0.960 PMCY 0.983 0.988 TOTI 0.986 VEXP 0.996 0.914

Results

The List of Best Predictors of Thai-Export Value for Each Forecast Horizon

Forecast Horizon 1-month 3-month 6-month 9-month 12-month

Best Performing Indicators

IPRI IPRI IPRI IPRI CSE3

Conclusions

Common leading indicators are better predictors of Thai Export (both its contraction phrase and value) than Export Business Indices Growth of Import Price Index is the best

performing indicator in most cases. Export Inventory Index is the only Export

Business Index that outperforms common leading indicators only in the case of 12-month ahead forecast.

Conclusions

An important limitation : Limited number of data Export Business Indices -- firstly

constructed in Dec 2001 Out-of-sample forecast technique only 50 months of data for evaluation

Future Workฟ้�าไม่�แน่�ใจว่�าอาจารย์�

จะใส่� part น่��เข้�าไปด้�ว่ย์ร�เปล่�าค่�ะ

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